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The new pension rules to be introduced in 2012 could have a huge impact on Small and Medium Enterprises (SMEs), according to a survey conducted by the Institute of Directors. From 2012, employees who earn more than the personal allowance, which is currently £7475, will have to be automatically enrolled into a pension scheme by their employer. The employer will be forced to contribute three percent into the pension scheme on behalf of their employee.

Of the businesses that don’t have pension schemes requiring the employer to contribute, 95 percent are SMEs. Following the start of the scheme, small businesses may have to hire additional personnel to deal with the administration of a pensions scheme in addition to financing auto-enrolment, which will be an additional burden, or outsource the work at the very least. Large companies have human resources to deal with administration.

According to the director of the Institute of Directors, Miles Templeman, the government hasn’t sufficiently considered the financial implications a move like this could have on a small business. He said:

“Bigger businesses will mostly have pension arrangements for employees set up. Of course we need to improve retirement provision in the UK, but yet again it’s the small entrepreneur who is hit.”

The survey also revealed that a fifth of all employers were not even aware of the introduction of the new legislation. If the government expect the private sector to aid recovery of the economy by creating new jobs, they have to reduce the burden of legislation and the financial implications which therefore result.

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